CANADA FX DEBT-C$ rallies on risk appetite; touches 5-week high

Tue Sep 8, 2009 11:15am EDT
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 * C$ hits highest level since Aug. 4
 * Commodity backdrop triggers rally
 * Bond prices flat across the curve
 By Frank Pingue
 TORONTO, Sept 8 (Reuters) - Canada's dollar CADCAD=D3
rose versus the U.S. currency on Tuesday, driven by a rally in
commodities and equities, but it backed off a five-week high
reached earlier as traders opted to pocket some of the sharp
 The overnight surge in the Canadian dollar, which reached a
high of C$1.0674 to the U.S. dollar, or 93.69 U.S. cents, came
alongside a number of other currencies that took advantage of a
greater investor appetite for riskier assets.
 "A lot of these currencies were making spectacular gains
and I think the market just figured it was probably a good idea
to take some profit on these positions," said David Watt,
senior currency strategist at RBC Capital Markets. "So again,
it's just the market taking a look at the situation and taking
some money off the table."
 By 10:55 a.m (1455 GMT), the Canadian unit was at C$1.0722
to the U.S. dollar, or 93.27 U.S. cents, up from C$1.0867 to
the U.S. dollar, or 92.02 U.S. cents, at Friday's close.
 The Bank of Canada did not offer a closing level for the
Canadian dollar on Monday as North American financial markets
were closed for Labor Day.
 The bulk of the Canadian dollar's rise came alongside a
rally in prices for oil and gold, both considered key Canadian
exports whose prices often influence the currency.
 Oil prices climbed above $70 a barrel on a growing risk
appetite, while gold prices topped $1,000 an ounce for the
first time in six month. [O/R] [GOL/].
 A chunk of the currency's retreat from the overnight high
followed data that showed Canadian building permits fell 11.4
percent in July, but the report was not blamed for the slight
pullback as it is not considered key data. [ID:nN08293340]
 "After the employment data on Friday, building permits
isn't going to have any definitive impact on the Canadian
dollar," said Watt.
 Last week's jobs data showed the economy unexpectedly added
27,100 jobs in August even though the unemployment rate rose to
an 11-1/2 year high of 8.7 percent. [ID:nN04153956]
 Canadian bond prices were mixed across the curve but held
near the break even level as gains in North American equity
markets sapped demand for more secure government debt.
 The S&P/TSX composite index .GSPTSE was up 1 percent at
11,131.87, while the Dow Jones industrial average .DJI was up
0.58 percent at 9,495.76.
 The two-year bond CA2YT=RR was up 4 Canadian cents at
C$99.49 to yield 1.262 percent, while the 10-year bond
CA10YT=RR shed 21 Canadian cents to C$102.85 to yield 3.402
 The 30-year bond CA30YT=RR slipped 20 Canadian cents to
C$118.40 to yield 3.907 percent.
 Canadian bonds underperformed their U.S. counterparts at
the five- and 10-year portion of the curve. The Canadian
10-year bond yield was 5.1 basis points below its U.S.
counterpart, compared with 6.8 basis points on Friday.
 (Editing by Jeffrey Hodgson)